Save Detroit, Eliminate CAFE Standards?

In politicians’ dreams, the way forward for Detroit is to ditch the SUV and make hip little vehicles the size of Smart Cars and the engine of a Prius. Oh, and they want the automakers to be insanely profitable, too, which is problematic since tiny, energy-efficient cars aren’t big money makers for anyone, not even Toyota.

If Detroit manages to turn around, there won’t be one silver bullet that does it — just a lot of changes in all the places they’re needed. Holman Jenkins fingers one culprit: CAFE standards:

Like all regulatory schemes, Congress’s hallowed Corporate Average Fuel Economy rules froze in place a conception of the auto industry as it appeared to the simple minds of Congress in the early 1970s, when three manufacturers dominated the U.S. market, making full lines of vehicles. Today, more than 25 companies sell vehicles here, and the corollary of such diversity, normally, is specialisation.

The Big Three, left to their own devices, would surely specialize in those vehicles on which they make money — i.e., those with hefty price tags and markups relative to their man-hour content. Even at the peak of gas prices, half the vehicles sold in the U.S. were light trucks. In November, amid a collapsed home construction industry and with $4 gasoline fresh in mind, what were the two top sellers? Pickups by Ford and Chevy — and the Dodge Ram was No. 7.

Shouldn’t this be telling us something about how to make the Big Three “viable”?

The whole thing is quite a worthwhile read. Of course, given the political changes in Washington, including the ascendance of environmentalist Henry Waxman — who took control of the Energy and Commerce Committee from Michigan’s John Dingell — this isn’t going to happen.

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